 1.What are the three basic economic questions? 2.How are these questions answered in a command economy? 3.Product differentiation is characteristic of what market structure? 4.“Good weather leads to an increase in Blueberry crop” Demand or supply/ increase (right) or decrease (left) 5.What economic problem does the U.S. share with 100% of all nations in the world? 6.Describe equilibrium on a supply and demand graph. 7.Show a PPC curve with a point representing inefficient use of resources. Review

EQ: How do we measure a nation’s wealth?

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 Intro Video

  Gross Domestic Product  “GDP is the total market value of all final goods and services produced within a country in a given period of time.”  Activity:  Breakdown the following parts of the definition. What does each mean?  total market value  Of all  final goods and services  within a country  in a given period of time Definition of GDP

 With a partner, what is included in GDP?

Gross STATE Product California, it is often said, would be the world’s sixth- or seventh-largest economy if it was a separate country. Actually, that would be the eighth, according to this map, as France (with a GDP of $2,15 trillion) is #8 on the aforementioned list. Texas’ economy is significantly smaller, exactly half of California’s, as its GDP compares to that of Canada (#10, $1,08 trillion). Florida also does well, with its GDP comparable to Asian tiger South Korea’s (#13 at $786 billion). Illinois – Mexico (GDP #14 at $741 billion) New Jersey – Russia (GDP #15 at $733 billion) Ohio – Australia (GDP #16 at $645 billion) New York – Brazil (GDP #17 at $621 billion) Pennsylvania – Netherlands (GDP #18 at $613 billion) Georgia – Switzerland (GDP #19 at $387 billion) North Carolina – Sweden (GDP #20 at $371 billion) Massachusetts – Belgium (GDP #21 at $368 billion) Washington – Turkey (GDP #22 at $358 billion) Virginia – Austria (GDP #24 at $309 billion) Tennessee – Saudi Arabia (GDP #25 at $286 billion) Missouri – Poland (GDP #26 at $265 billion) Louisiana – Indonesia (GDP #27 at $264 billion) Minnesota – Norway (GDP #28 at $262 billion) Indiana – Denmark (GDP #29 at $256 billion) Connecticut – Greece (GDP #30 at $222 billion) Michigan – Argentina (GDP #31 at $210 billion)

 What is NOT included in GDP?

 GDP is the sum of the following:  Consumption (C)  Investment (I)  Government Purchases (G)  Net Exports (NX) GDP = C + I + G + NX  Why does GDP = Y? Think back, way back…. The components of GDP Y =

 Remember this? –Every transaction has a buyer and a seller. –Every dollar of spending by some buyer is a dollar of income for some seller.

  Consumption (C):  The spending by households on goods and services, with the exception of purchases of new housing.  Investment (I):  The spending on capital equipment, inventories, and structures, including new housing.  Government Purchases (G):  The spending on goods and services by local, state, and federal governments.  Does not include transfer payments such as social security  Net Exports (NX):  Exports minus imports. Components of GDP

 1.You buy a movie ticket 2.Purchase of a new house 3.You cut your lawn 4.You buy a new Toyota made in Japan 5.Tuition for college 6.Apartment rent 7.The government pays a social security check 8.Purchase of a share of Microsoft stock 9.A stay at home mom cares for her children 10.You sell concert tickets that you already purchased 11.A farmer purchases a tractor 12.You sell your house that you lived in for two years 13.The U.S. exports minerals to Russia 14.General Motors purchases Ford 15.Your telephone bill Summary - C, I, G, or NX, or NC

  Come up with 10 (2 each) scenarios that increase or decrease the GDP  C, I, G, NX, and one that doesn’t count in GDP  5 volunteers  Each volunteer holds their sign up if it increases their component of GDP or down if it decreases. GDP Scenarios

  What is the GDP equation?  What is the definition of nominal GDP?  What is the definition of real GDP?  What is the general rising of prices called?  What is the purpose of the GDP deflator?  What is the largest component of U.S. GDP? Review

 What is the percentage breakdowns for the U.S.

 What does this say about our economy?

  Nominal GDP values the production of goods and services at current prices.  Real GDP values the production of goods and services at constant prices. Real vs Nominal GDP

 Year# of hot dogs sold Price# of hamburge rs sold PriceNominal GDP $150$ $2100$ $3150$4 Nominal GDP What is NOMINAL GDP for each year?

 REAL GDP

 REAL GDP? Year# of hot dogs sold Price# of hamburge rs sold PriceReal GDP $150$ $2100$ $3150$4 What is REAL GDP for each year using 2005 base year?

 GDP Deflator What is the GDP deflator for 2005, 2006, and 2007 using our previous example?

 GDP Deflator (cont). Using the GDP Deflator for 2007, show the calculations to find real GDP. Did it match your original calculation for 2007 GDP?

 YearP of milkQ of milk P of honey Q of honey Nominal GDP Real GDP Deflator 2005 (base) $1100$ $1200$ $2200$4100 Summary Did economic well-being rise more in 2006 or 2007? Explain?

 1.What are the keys to capitalism? 2.Law of Demand: A a decrease in ______________would cause an increase in quantity demanded? 3.What type of business organization has limited liability? 4.What is entrepreneurship? 5.Minimum wage is an example of a price _________. This type of government interference in the market causes a _____________. 6. Market clearing price is another term for ___________. Review

  GDP is the best single measure of the economic well- being of a society.  GDP per capita (per person) tells us the income and expenditure of the average person in the economy.  Higher GDP per person indicates a higher standard of living.  GDP is not a perfect measure of the happiness or quality of life, however. Is GDP a good measure of economic well-being?

  Some things that contribute to well-being are not included in GDP.  The value of leisure.  The value of a clean environment.  The value of almost all activity that takes place outside of markets, such as the value of the time parents spend with their children and the value of volunteer work. What does GDP not tell us?

 Some perspective… 3 CD’s/3 CM’s

 Summary  3 CD’s about GDP  3 CM’s about GDP